Question 1

Figure 10-12 
-Refer to Figure 10-12.Which of the following is an appropriate label for Line 1?

Accepted Answer

A)   social cost
B)   social value
C)   private cost
D)   private valueE) A) and B)
F) A) and C)

Question 2

Using a supply and demand diagram,demonstrate how a negative externality leads to market inefficiency.How might the government help to eliminate this inefficiency?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> When a negative externality exists,the ...

Question 3

Dioxin emission that results from the production of paper is a good example of a negative externality because

Accepted Answer

A)   self-interested paper firms are generally unaware of environmental regulations.
B)   there are fines for producing too much dioxin.
C)   self-interested paper producers will not consider the full cost of the dioxin pollution they create.
D)   toxic emissions are the best example of an externality.E) A) and B)
F) B) and C)

Question 4

Negative externalities lead markets to produce a smaller quantity of a good than is socially desirable,while positive externalities lead markets to produce a larger quantity of a good than is socially desirable.

Accepted Answer

A) True 
 B)False

Question 5

According to the Coase theorem,private parties can solve the problem of externalities if

Accepted Answer

A)   the cost of bargaining is small.
B)   the initial distribution of legal rights favors the person being adversely affected by the externality.
C)   the number of parties involved is sufficiently large.
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 6

Which of the following statements is correct?

Accepted Answer

A)   Taxes are more difficult to administer than regulations.
B)   Taxes provide incentives for firms to adopt new methods to reduce negative externalities.
C)   Command-and-control policies provide incentives for private decisionmakers to solve their problems on their own.
D)   Corrective taxes distort incentives.E) None of the above
F) A) and C)

Question 7

In many cases the Coase theorem does not work well because

Accepted Answer

A)   there are too few parties at the negotiation table.
B)   the government does not know about the Coase theorem.
C)   transaction costs are too high.
D)   transaction costs are too low.E) B) and C)
F) A) and B)

Question 8

Most taxes distort incentives and move the allocation of resources away from the social optimum.Why do corrective taxes avoid the disadvantages of most other taxes?

Accepted Answer

A)   Corrective taxes apply only to goods that are bad for people's health,such as cigarettes and alcohol.
B)   Because corrective taxes correct for market externalities,they take into consideration the well-being of bystanders.
C)   Corrective taxes provide incentives for the conservation of natural resources.
D)   Corrective taxes do not affect deadweight loss.E) C) and D)
F) A) and D)

Question 9

Figure 10-4 3." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-4.This market

Accepted Answer

A)   has no need for government intervention.
B)   would benefit from a tax on the product.
C)   would benefit from a subsidy for the product.
D)   would maximize total well-being at Q3.E) All of the above
F) C) and D)

Question 10

Figure 10-13.On the graph,Q represents the quantity of plastics and P represents the price of plastics. 
-Refer to Figure 10-13.In order to reach the social optimum,the government could

Accepted Answer

A)   impose a tax of $2 per unit on plastics.
B)   impose a tax of $6 per unit on plastics.
C)   impose a tax of $8 per unit on plastics.
D)   offer a subsidy of $6 per unit on plastics.E) B) and D)
F) None of the above

Question 11

Figure 10-19 
-Refer to Figure 10-19.Each additional unit of the good that is produced yields an external benefit of

Accepted Answer

A)   $15.
B)   $23.
C)   $36.
D)   $89.E) B) and D)
F) A) and B)

Question 12

According to the Coase theorem,the private market will need government intervention in order to reach an efficient outcome.

Accepted Answer

A) True 
 B)False

Question 13

Figure 10-2.The graph depicts the market for plastic. 
-Refer to Figure 10-2.Suppose that the production of plastic creates a social cost which is depicted in the graph above.What is the socially optimal quantity of plastic?

Accepted Answer

A)   200 units
B)   450 units
C)   500 units
D)   650 unitsE) C) and D)
F) A) and C)

Question 14

Figure 10-1 
-Refer to Figure 10-1.This graph represents the tobacco industry.Without any government intervention,the equilibrium price and quantity are

Accepted Answer

A)   $1.90 and 38 units,respectively.
B)   $1.80 and 35 units,respectively.
C)   $1.60 and 42 units,respectively.
D)   $1.35 and 58 units,respectively.E) None of the above
F) B) and D)

Question 15

Organizers of an outdoor concert in a park surrounded by residential neighborhoods are likely to consider the noise and traffic cost to residential neighborhoods when they assess the financial viability of the concert venture.

Accepted Answer

A) True 
 B)False

Question 16

Table 10-1
The following table shows the private value,private cost,and external cost for various quantities of output in a market.
 
-Refer to Table 10-1.What is the socially-optimal quantity of output in this market?

Accepted Answer

A)   1 unit
B)   2 units
C)   3 units
D)   4 unitsE) B) and C)
F) A) and D)

Question 17

Figure 10-19 
-Refer to Figure 10-19.Each additional unit of the good that is produced yields an external

Accepted Answer

A)   benefit of $15.
B)   benefit of $36.
C)   cost of $15.
D)   cost of $36.E) B) and D)
F) All of the above

Question 18

Government intervention in the economy with the goal of promoting technology-producing industries is known as patent policy.

Accepted Answer

A) True 
 B)False

Question 19

Figure 10-3 0. B)  P1. C)  P2. D)  None of the above is correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-3.At the private market outcome,the equilibrium price will be

Accepted Answer

A)   P0.
B)   P1.
C)   P2.
D)   None of the above is correct.E) C) and D)
F) A) and D)

Question 20

With a corrective tax,the supply curve for pollution is

Accepted Answer

A)   perfectly inelastic.
B)   perfectly elastic.
C)   upward sloping.
D)   downward sloping.E) A) and B)
F) B) and C)

Exam 10: Externalities

Table 10-1 The following table shows the private value,private cost,and external cost for various quantities of output in a market. -Refer to Table 10-1.What is the socially-optimal quantity of output in this market?

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Government intervention in the economy with the goal of promoting technology-producing industries is known as patent policy.

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Which of the following statements is correct?

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In many cases the Coase theorem does not work well because

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Negative externalities lead markets to produce a smaller quantity of a good than is socially desirable,while positive externalities lead markets to produce a larger quantity of a good than is socially desirable.

Correct AnswerverifiedShow Answer

Most taxes distort incentives and move the allocation of resources away from the social optimum.Why do corrective taxes avoid the disadvantages of most other taxes?

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Figure 10-12 -Refer to Figure 10-12.Which of the following is an appropriate label for Line 1?

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According to the Coase theorem,the private market will need government intervention in order to reach an efficient outcome.

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Figure 10-13.On the graph,Q represents the quantity of plastics and P represents the price of plastics. -Refer to Figure 10-13.In order to reach the social optimum,the government could

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Organizers of an outdoor concert in a park surrounded by residential neighborhoods are likely to consider the noise and traffic cost to residential neighborhoods when they assess the financial viability of the concert venture.

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Figure 10-3 -Refer to Figure 10-3.At the private market outcome,the equilibrium price will be

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Figure 10-1 -Refer to Figure 10-1.This graph represents the tobacco industry.Without any government intervention,the equilibrium price and quantity are

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Figure 10-4 -Refer to Figure 10-4.This market

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Using a supply and demand diagram,demonstrate how a negative externality leads to market inefficiency.How might the government help to eliminate this inefficiency?

Correct Answerverified When a negative externality exists,the ...View AnswerShow Answer

Figure 10-2.The graph depicts the market for plastic. -Refer to Figure 10-2.Suppose that the production of plastic creates a social cost which is depicted in the graph above.What is the socially optimal quantity of plastic?

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With a corrective tax,the supply curve for pollution is

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Dioxin emission that results from the production of paper is a good example of a negative externality because

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Figure 10-19 -Refer to Figure 10-19.Each additional unit of the good that is produced yields an external benefit of

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According to the Coase theorem,private parties can solve the problem of externalities if

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Figure 10-19 -Refer to Figure 10-19.Each additional unit of the good that is produced yields an external

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When a negative externality exists,the ...
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